Nvidia (NVDA.US) is highly sought after by retail investors! Net purchases exceed US$30 billion in 2024

The Zhitong Finance App learned that according to data from Vanda Research, retail investors have invested a total of nearly 30 billion US dollars in NVDA.US (NVDA.US) stocks this year. As of December 17, it has become the most net purchased stock by retail investors in 2024.

Compared to the SPDR S&P 500 ETF Trust (SPDR S&P 500 ETF Trust), which tracks broad benchmarks in the US stock market, Nvidia's net inflow of capital from retail investors is almost double that of the former. It is also expected to replace Tesla (TSLA.US), which was a favorite among retail investors in 2023 and attracted the most net purchases from retail investors in 2023.

Marco Iachini, senior vice president of Vanda Research, said: “As it turns out, Nvidia is stealing Tesla's limelight to some extent because of its impressive price increase.”

Stock prices are booming

Over the past year, Nvidia, the giant of artificial intelligence chips, has been attracting investors of all sizes. Nvidia was included in the Dow Jones Index last month and is the best performer among the 30 constituent stocks of the index so far in 2024.

Despite its erratic performance in December, Nvidia's stock price is expected to rise more than 180% by the end of the year. This sharp rise in stock prices has propelled Nvidia to become one of the elite companies with a market capitalization of over $3 trillion. The company is currently the second-largest company by market capitalization in the US, after Apple (AAPL.US).

This push for Nvidia shares has led to the stock having a higher weight in the holdings of ordinary investors. According to data from Vanda Research, Nvidia weighs more than 10% of the typical home trader's investment portfolio, compared to only 5.5% at the beginning of 2024. The stock is now the second-largest holdings of ordinary retail investors, after Tesla.

Furthermore, Nvidia attracted more than 885% in net purchases from retail investors in 2024 compared to three years ago. Gil Luria, head of technology research at investment bank D.A. Davidson, said: “In terms of retail investors becoming an important part of the company's equity so quickly, Nvidia really stands out.” “This rise is very remarkable.”

Marco Iachini said that before and after Nvidia announces quarterly earnings this year, capital flows to the stock tend to surge. Retail investors were still buying Nvidia shares when the US stock market declined in early August.

What is certain is that as the stock lost some momentum, capital inflows have cooled to a certain extent. Gil Luria said that although Nvidia's performance continued to exceed Wall Street's expectations, the extent that it exceeded expectations was not enough for the company's stock to continue to rise rapidly. He added that now, the stock has reached a more “balanced” and “reasonable” level.

Although investing is largely a digital activity, market participants' love for Nvidia has spread to the real world. At the end of August, some people gathered in New York for a well-recorded follow-up party focusing on Nvidia's earnings report. The incident occurred a few months after the stock's 10-1 split, usually to motivate retail investors.

Although retail investors hold a large number of Nvidia shares, this factor has not boosted the price-earnings ratio of the stock, as did Tesla and Palantir (PLTR.US). However, Morning Star stock strategist Brian Colello said that for stocks of the size of Nvidia, the volatility is “quite high,” which may highlight the role of retail investors in driving stock prices. He said, “The stock price of such a big company can fluctuate so much on any given day, which is sometimes astonishing.”

What do retail investors want next?

2024 is the second year in a row that one stock's net capital inflow surpassed the SPDR S&P 500 ETF Trust. Marco Iachini said that large inflows into ETFs could ease investors' concerns about abandoning generalized index funds considered safe investments. He said that large inflows of capital into large technology stocks in the past two years may reflect traders chasing the ongoing bull market.

Marco Iachini said that despite strong returns, Nvidia could be a surprising choice for the typical domestic US investor. He said that although Nvidia CEO Wong In-hoon always wears iconic leather jackets, the company lacks a “god-like” personality to attract the attention of retail investors.

Marco Iachini notes that Palantir was favored by retail investors in the fourth quarter and could become a hit in the new year. According to data from Vanda Research, the stock was the ninth most popular stock in 2024, surpassing Amazon (AMZN.US), Alphabet (GOOGL.US), and Microsoft (MSFT.US). The data shows that Palantir shares have soared by nearly 380% so far this year, making it the best performing stock in the S&P 500 index.